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03 Jun 2010

New bill deals with creeping acquisitions under section 50 of the Trade Practices Act

The Australian Government has introduced the Competition and Consumer Legislation Amendment Bill 2010 into Parliament, a bill which will amend section 50 of the Trade Practices Act to deal with creeping acquisitions.

What are creeping acquisitions? and greenfields sites?

After years of Senate inquiries, political debate and agitation by the small business lobby, the Federal Government's intention is to move on its promise in the lead up to the 2007 election to confirm the ACCC's powers to be able to oppose acquisition of assets in small retail markets.

The Explanatory Memorandum also notes the Government's view that so-called greenfields "site acquisitions", including entry into or acquisition of a lease or acquisition of an option to acquire land or an acquisition of undeveloped land, are also capable of being reviewed and blocked by the ACCC, if found to substantially lessen competition in a local market.

The Government's view is that it is appropriate for the ACCC to review greenfields developments, where:

  • a new site development is in a built-up area; and
  • there is limited availability of alternative sites for potential competitors in the area; and
  • the proposed operator already has a significant retailing presence in that local market; and
  • in the absence of that site development, a new competitor would be likely to open a store on that site.

Creeping acquisitions and section 50 of the Trade Practices Act

Currently, section 50 prohibits mergers or acquisitions that would, or would be likely to substantially lessen competition in a market.

The Bill would change this to allow any market to be considered, meaning that mergers could be blocked if substantial lessening of competition occurred in a secondary market, not just the primary market in which a target operates.

Secondly, section 50 currently applies only to substantial markets in Australia, or a State, or Territory, or region, of Australia.

Under the Bill, the markets no longer would need to be "substantial", a change needed to clarify that the ACCC can consider creeping acquisitions in small or local markets.

The Explanatory Memorandum makes it clear that the Government agrees with the ACCC approach of defining local markets as narrow as a three to five kilometre radius around a site.

Who will be affected by this change?

At one level, the change simply confirms current ACCC practice.

Although the drivers for the change may have originated in the supermarket/grocery sector, this change will apply across the board to any retail industry and so implications should be considered in health/pathology, petrol, liquor, optometry, taxis and other retail sectors.

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Clayton Utz communications are intended to provide commentary and general information. They should not be relied upon as legal advice. Formal legal advice should be sought in particular transactions or on matters of interest arising from this communication. Persons listed may not be admitted in all States and Territories.